The Philly Fed's outlook for manufacturing just fell to a 3-year low

Manufacturing activity contracted less than expected in January
according to the latest survey from the Philadelphia Federal
Reserve.

The Philly Fed manufacturing index came in at -3.5, better than
expected and up from last month's -10.2
reading. Expectations were for the report to come in at
-5.9.

The report's reading on future expectations, however, continued
to decline and is now at the lowest levels since November
2012.

In a note to clients on Wednesday Joe LaVorgna at Deutsche Bank
said the Philly Fed's six-month outlook
was particularly worth watching.

Philly
Fed

The report also indicated that inventories continued to
decline and that although the index for current new orders
remained in negative territory it did increase 10 points from the
prior month.

January's special question to survey respondents was about energy
prices and the impact they are and will have on business
activity, with most firms responding that the net effects have
been positive, though of course a number of firms reported
decreased demand from energy-producing companies.

Overall, the Philly Fed summarized the report, writing:

Weakness in regional manufacturing conditions continued
this month, according to firms responding to the January survey.
While indexes for current general activity and new orders
remained negative, the indexes increased from lower readings at
the end of last year. Firms reported an increase in shipments
this month but a modest decrease in employment.
Indicators for future conditions remained positive
overall but suggested a continuing deterioration in confidence
about manufacturing growth for the first half of
2016.